Labor

Yesterday, the U.S. District Court for the Eastern District of Texas issued a nationwide injunction preventing the U.S. Department of Labor from implementing its regulations revising the white collar exemptions. Therefore, the increase in the minimum salary level to $913.00 per week that was expected to go into effect on December 1 will not occur on that date.
In granting the injunction, the Court held that Congress intended the executive, administrative, and professional exemptions to be based on an employee’s duties — not on an employee’s salary level. Specifically, the Court stated: “After reading the plain meanings together with the statute, it is clear Congress intended the EAP [executive, administrative, professional] exemption to apply to employees doing actual executive, administrative, and professional duties. In other words, Congress defined the EAP exemption with regard to duties, which does not include a minimum salary level.” Although the USDOL has imposed a minimum salary level requirement to qualify for the white collar exemptions since the 1940s, the Court nevertheless determined that the increase in the minimum salary level from $455.00 per week to $913.00 per week was so large that “it supplants the duties test.” The Court stated: “If Congress intended the salary requirement to supplant the duties test, then Congress, and not the Department, should make that change.”
So, what does this mean for the future of these regulations? Although this is only a preliminary injunction that prevents the implementation of the regulations until a final determination is made, this could very well be a permanent end to the regulations. A final determination is unlikely to be issued before the inauguration of President Trump, and it seems less likely that the USDOL under the Trump administration will be inclined to continue to vigorously defend the regulations in this litigation. A more likely outcome is that the USDOL may rescind and reissue the regulations with a less drastic salary increase, or perhaps even not reissue the regulations at all.
This development leaves many employers wondering what to do about the employees who have already been told that they will be reclassified from exempt status to non-exempt status beginning next week and the employees who have been told that they will receive salary increases beginning next week in order to maintain their exempt status. The employees who have been told that they will be reclassified from exempt to non-exempt status can certainly be told at this point that they will remain exempt employees (assuming, of course, that their duties continue to qualify them for one of the white collar exemptions). In addition, from a legal standpoint, nothing would preclude an employer from rescinding the salary increases that were scheduled to go into effect next week for employees who were told that they would receive a salary increase to maintain their exempt status (unless the employer has entered into an employment contract that binds the employer to providing the salary increase). Obviously, from a human resources standpoint, this will require clear and prompt communication regarding the reason why the salary increase is being rescinded.
Employers in New York should also keep in mind that the New York State Department of Labor has proposed a gradual increase to the minimum salary levels to qualify for the executive and administrative exemptions. If these proposed regulations are adopted, the first salary increase will occur on December 31, 2016. Employers outside of New York City, Nassau, Suffolk, and Westchester Counties will be required to pay a minimum salary of $727.50 per week to executive and administrative employees. Employers in New York City who employ 11 or more employees will be required to pay a minimum salary of $825.00 per week to executive and administrative employees. Employers in New York City who employ 10 or fewer employees will be required to pay a minimum salary of $787.50 per week to executive and administrative employees. Employers in Nassau, Suffolk, and Westchester Counties will be required to pay a minimum salary of $750.00 per week to executive and administrative employees. These amounts will increase each year. There is still no minimum salary under New York law to qualify for the professional exemption even under the new proposed regulations. We will provide an update regarding whether these proposed regulations become final regulations.

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The Chronicle has reported in the recent past about a division of views within the AAUP as to its proper focus. In 2012, a slate of officers running under the “AAUP Organizing for Change” banner won election fairly handily (although only about 10% of the AAUP’s membership actually voted). At the time of that election, a former AAUP Staff member described the election outcome as affecting “to a large extent, whether the association remains anchored principally to its commitment to the profession and its standards and principles or becomes an organization principally focused on a particular means—unionization—of achieving these objectives." This past February a slate of challengers, seeking to return AAUP to its traditional focus instead of a unionization focus, looked to unseat the “Organizing for Change” leadership. At that time, The Chronicle reported on an interview given by Rudy H. Fichtenbaum, the “Organizing for Change” candidate running for re-election as the AAUP’s president, in which he was said to have described “the real choice before the AAUP membership [as] whether the association would continue to build a national network of activist chapters or retreat into being a group focused on running a Washington office that weighs in on few controversies each year.” Mr. Fichtenbaum was quoted as saying, “Our emphasis has totally been on organizing people.” The election results were just reported and all four top spots will continue to be held by the “Organizing for Change” incumbents. Although Mr. Fitchtenbaum’s election was close, winning with just under 52% of the vote, the other candidates on that slate won more handily. Despite all of the controversy, however, only 4,433 valid votes were cast, out of a total membership of about 47,000. So it is hard to draw too many conclusions about what these results actually reflect within the full academic community. Nonetheless, it seems safe to assume that this latest victory will be viewed as a “mandate” by the “Organizing for Change” leadership to continue, and perhaps even increase, AAUP’s focus on unionization. Historically, this may not have had meant much for private colleges and universities. Since the U.S. Supreme Court’s 1980 decision in NLRB v. Yeshiva University, which held that in the traditional higher education setting, faculty are “managerial” employees not eligible for unionization under the National Labor Relations Act, the full time faculty at most colleges and universities have not had the legal option to unionize. However, the Obama National Labor Relations Board – at full strength for the first time in a decade -- has been actively overturning a host of NLRB precedents and established practices which collectively increase the likelihood of union organizing. These changes have occurred against the backdrop of declining unionization – organized labor represents only about 6.7% of American workers in the private sector, which is near its all-time record low. While the NLRB does not have the authority to simply “overturn” a Supreme Court decision, the Yeshiva decision requires a very fact specific application. As a result, the NLRB may have room to “interpret” Yeshiva in a different way going forward, while still utilizing the framework of the Court’s analysis. The NLRB clearly has signaled its intention to consider that course of action. Recently, in connection with its review of a faculty election issue involving Pacific Lutheran University, the NLRB has invited interested parties to submit briefs on a number of issues related to its application of Yeshiva, including:

Which of the factors identified in NLRB v. Yeshiva University, 444 U.S. 672 (1980), and the relevant cases decided by the Board since Yeshiva are most significant in making a finding of managerial status for university faculty members and why?

In the areas identified as “significant,” what evidence should be required to establish that faculty make or “effectively control” decisions?

Are the factors identified in the Board case law to date sufficient to correctly determine which faculty are managerial?

If the factors are not sufficient, what additional factors would aid the Board in making a determination of managerial status for faculty?

Is the Board’s application of the Yeshiva factors to faculty consistent with its determination of the managerial status of other categories of employees and, if not, (a) may the Board adopt a distinct approach for such determinations in an academic context, or (b) can the Board more closely align its determinations in an academic context with its determinations in non-academic contexts in a manner that remains consistent with the decision in Yeshiva?

Do the factors employed by the Board in determining the status of university faculty members properly distinguish between indicia of managerial status and indicia of professional status under the Act?

Have there been developments in models of decision making in private universities since the issuance of Yeshiva that are relevant to the factors theBoard should consider in making a determination of faculty managerial status? If so, what are those developments and how should they influence the Board’s analysis?

As suggested in the Yeshiva decision, are there useful distinctions to be drawn between and among different job classifications within a faculty--such as between professors, associate professors, assistant professors, and lecturers or between tenured and untenured faculty--depending on the faculty's structure and practices?

Changes in how the NLRB applies the Supreme Court’s Yeshiva decision, coupled with an AAUP more inclined to pursue union organizing, could lead to some very interesting developments for private colleges and universities in the next year or so. Stay tuned.